The Merrimack Station power plant in Bow, owned by PSNH, is the region's biggest coal-fired power plant. New federal rules cutting carbon emissions from power plants may not affect it because NH has already reduced emissions under the program known as RGGI.

Wednesday, May 9, 2012

Low natural gas prices cut use of PSNH’s biggest power plant

By DAVID BROOKS

Staff Writer

The near-record low price of natural gas is helping electricity users by dropping the price of power across the region, but now it has claimed a victim: Public Service of New Hampshire’s biggest power plant, coal-fired Merrimack Station in Bow.

The plant, which is getting a $422 million upgrade for a scrubber to cut emissions of mercury and sulphur, will be used much less often this year because it’s cheaper for the company to buy electricity produced elsewhere by natural gas.

In recent years, the two units of the 460-megawatt plant have been used only about half the time, mostly in power-hungry hot summer and cold winter months.

This usage, measured by what is known as the capacity factor, will fall further this year. PSNH says Merrimack Station will be used only during the highest-power periods, when the cost of electricity on the open market rises.

The smaller, 50-megawatt, coal-fired units at the Schiller power plant in Portsmouth are still being used, according to PSNH spokesman Martin Murray.

This cut in operations at PSNH’s flagship plant comes even as it puts finishing touches on the controversial and costly upgrade, which has led to a temporary rate surcharge that adds about $5 a month to the average homeowner’s bill.

It is a reflection of the changes facing energy markets caused by the collapse in domestic natural gas prices, which have gone from almost $11 per 1,000 cubic feet four years ago to less than $2.40 now.

Natural gas now drives the turbines that make more than half of New England’s electricity. Back in 2000, when Merrimack Station was a “baseline power” plant, operating almost of the time, that fuel supplied only 15 percent of the region’s electricity.

The fall in natural gas price is partly prompted by a decline in demand due to the recession and the mild winter, but mostly by a spike in domestic production that continues to soar even in the face of controversy over environmental results of the drilling process known as “fracking.” Prices show no sign of rising any time soon.

The price decline has led many utilities to reduce the so-called energy charge, which covers the actual cost of producing each kilowatt of electricity. These are separate from the transmission charges, which cover the cost of lines, substations and other costs.

In Massachusetts, NStar has asked state regulators to cut its energy charge 16 percent, while National Grid has lowered its charge nearly 19 percent.

In New Hampshire, PSNH has asked the Public Utilities Commission to cut its energy charge about 10.5 percent, from 8.75 cents per kilowatt-hour to 7.83 cents. A typical home uses about 500 kilowatt-hours a month.

The request will be taken up this summer. Even if that cut is approved, however, PSNH customers won’t necessarily see their bills decline.

PSNH has requested an almost identical increase in the transmission portion of the rate, from 1.23 cents per kilowatt-hour to 1.94 cents. If both requests are approved, the average bill actually will increase, by less than 1 percent.

Murray says the increase is needed to cover requirements that it buy higher-priced power from various independent producers, including small hydropower dams and wood-burning plants. The fall in natural-gas-fired power prices had the ironic effect of increasing these charges, PSNH claims.

Not everybody agrees. A firm called Resident Power says PSNH is just shifting around costs, moving them from energy charges, where it faces competition, to transmission charges, where it remains a monopoly.

Resident Power has been poaching PSNH residential customers over the past year. It buys electricity on the open market and sells it at rates that are 5 percent to 10 percent lower than PSNH’s energy charges. Resident Power customers pay the same transmission portion on the electric bill as other customers.

However, if the energy charge on PSNH bills falls 10.5 percent, then some Resident Power customers who have recently signed one-year contracts actually will pay slightly more than PSNH customers, which flies in the face of the new company’s sales pitch.

The firm is urging its customers to oppose the proposed changes in rates.

As for the scrubber, PSNH says it is coming in under budget and almost a year ahead of schedule.

Costs of the scrubber are behind a 98-cent-per-kilowatt-hour surcharge on the energy rate that was approved as a temporary measure earlier this year. PSNH wants to make that surcharge a permanent part of the energy rate.

The scrubber was mandated by the state Legislature in 2006. Burning coal produces pollutants, notably mercury, that enter the ecosystem; the scrubber removes virtually all of it.

The huge cost of the system – more than double initial estimates – led environmentalists who had once sought the scrubber to change tack and oppose it, partly because it does nothing to cut emissions of carbon dioxide, the biggest greenhouse gas.

They argued that the money would be better spent on less-polluting energy production or on energy-efficiency drives, but the Legislature, prodded by union workers who were eager for construction jobs during the recession, confirmed the scrubber in 2009.

David Brooks can be reached at 594-6531 or dbrooks@nashuatelegraph.com.